What is Market

Research?

http://www.google.com/insig

hts/consumersurveys/home#

A neutral source on information

Allows for change in the economy

It allows freedom of choice

What is the role of PRICE in the economy?

DEMAND

DemandDemand is the desire to have some

good or service and the ability to pay for it.

The law of demand states that when the PRICE of a good or service GOES DOWN, consumers buy MORE, meaning demand increases.

If price goes UP, demand should DECREASE.

The Big Bang Theory 5x05 - The Sword - YouTube

Demand Curve

Pt.Price

of DVDs

Quantity Demande

d

A $30 0

B $25 1

C $20 2

D $15 3

E $10 4

F $5 50

Quantity

Price

1 2 4 53

5

15

20

10

25

30

A

B

C

D

E

F

DEM

AND CU

RVE

https://www.youtube.com/watch?v=Z1Auh-G--vQ

Demand ChangesChange in quantity demanded is a

change in PRICE or QUANTIY. This will cause you to move along the curve, up/down. We call these “MOVERS”

Quantity

Price

A

B

C

D

E

F

Change in Quantity Demand

Moves along the curve

Demand ChangesChange in demand meanwhile is a

change in the AMOUNT YOU BUY. This means the curve will shift to the left or to the right. We call these “SHIFTERS”

Quantity

Price

A

B

C

D

E

F

Change in Demand

B

C

D

E

F

A

Shifts left or right

There are six factors that

influence Demand.

SubstitutesSubstitutes are goods/services

that can be used in place of another good or service.

If the price of a substitute changes, people may be more/less inclined to get the original item.

Example Pepsi or Coca Cola

P

Q

P

Q

Substitute’s price goes up

Substitute’s price goes down

ComplementsComplements are goods that

are used together, so that a rise in demand in one good will increase the demand for the other good.

Example:

hammer & nails

P

Q

P

Q

Complement’s price goes up

Complement’s price goes down

IncomePeople’s ability to buy certain

goods is affected by their income.

If their income changes, then their ability to buy certain goods will change.

P

Q

P

Q

Recession hits: Lower Incomes

Economic Growth: Higher Incomes

Consumer TastesPeople’s tastes are constantly

changing!

Advertising influences people’s tastes.

http://www.youtube.com/watch?v=R55e-uHQna0

TermsNormal Goods – goods consumers

demand more of when their income rises.

Inferior Goods – goods that consumers demand more of when their income falls.

P

Q

P

Q

Recession hits: Generic brand goods

Economic Growth: Generic brand goods

Consumer Expectations If you expect a good to go

on sale next month, you will WAIT to buy that product

Examples Cars

Gas

Tickle-Me-Elmo

P

Q

P

Q

Consumers expect price to rise

Consumers expect price to fall

Market SizeThe size of the market is based

on the number of consumers.

If people leave a region, the market size will decrease meaning the curve will shift to the left and vice versa.

Example People leaving Buffalo has caused a smaller

market size.

More people moving to Florida and Texas has created larger market sizes in these states.

P

Q

P

Q

Bigger Population Smaller Population

Elasticity of DemandElasticity of demand is how responsive

consumers are to price changes.

Elastic demand – quantity demanded will change greatly as price changes.

Elastic Demand

0Quantity

Price

1 2 4 53

5

15

20

10

25

30

A

BC

DE

F

DEMAND CURVE

When demand is elastic, prices will not change much, but quantity demanded will change.

Elasticity of Demand Inelastic demand – quantity demanded

will change little as price changes.

Inelastic Demand

0Quantity

Price

10

20

40

50

30

5

15

20

10

25

30

A

B

C

D

E

F

DEM

AN

D C

UR

VE

When demand is in elastic, prices will change a lot, but quantity demanded will not change much.

Fact

ors

that

Dete

rmin

e E

last

icit

yAre there good substitutes?

Yes = elastic No = inelastic

What proportion of income does it use?Large = elastic Small = inelastic

Is it a necessity or a luxury?Luxury = elastic Necessity = inelastic